UPSC One
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2023 · Q62

Which one of the following statements is not correct?

General Accounting Principles, Auditing and InsuranceRecording transactions
  1. ADepreciation is a non-cash expense.
  2. BDepreciation is the process of valuation of assets.
  3. CThe main cause of depreciation is wear and tear caused by usage.
  4. DDepreciation must be charged to ascertain true profit or loss of a business.

Explanation

Depreciation is a non-cash allocation of an asset's cost over its useful life, caused mainly by wear and tear from usage, and it must be charged to ascertain true profit or loss. However, depreciation is a process of cost allocation, not a process of valuing the asset at market worth. So statement (b) is the one that is not correct.